Financial Services and Markets Bill [HL]

Baroness Lawlor Excerpts

2nd reading
Monday 8th June 2026 Lords Chamber

[Baroness Lawlor (Con)]

My Lords, it is a pleasure to follow the noble Lord, Lord Sikka; I always learn from his speeches. The Bill is laudable in its aim to promote growth by cutting regulatory barriers, compliance, duplication and fragmentation, and, in doing so, to reduce the burdens and costs for businesses and support innovation. It aims to achieve these objectives by giving the FCA new powers, as we have heard today. I thank the Minister for his lucid explanation of the powers of the Payment Systems Regulator, which regulates credit card transfers, faster credit and BACS transfers, and which is to be abolished. Other new powers include the Financial Ombudsman Service’s regulatory powers for alternative dispute resolution under FSMA 2000, and the anti-money laundering and counterterrorism duties of the existing 22 professional bodies. The FCA will also have, as we have heard, duties transferred from legislation such as the Consumer Credit Act.

But the transfer of so many powers and functions to the FCA will not be a magic solution, nor indeed a solution at all, unless there is reform to how this regulator operates and how greater accountability can be achieved. The Bill will therefore need some amendments if the FCA is to promote growth and cut regulatory barriers effectively, with better arrangements than those it replaces, since there are many queries about how the FCA operates.

In 2025, the Lords Financial Services Regulation Committee, in its very good report—which has already been mentioned—found that the failings of the two main regulators, the PRA and the FCA, include:

“The deeply entrenched culture of risk aversion … getting in the way of doing what these firms do best … competing, innovating and growing”.


One question here is whether, given such doubts, the changes proposed in the Bill to how the FCA itself works, particularly in Clauses 16 to 22, will lead to the regulator working to promote growth and competition, and whether there is, at the same time, sufficient accountability, predictability and transparency, as well as the checks and balances we need.

I comment on this in respect to the principles, which have had a good airing today so far—I hope that noble Lords will forgive me. The noble Lord, Lord Burns, for instance, referred to the background to the 2000 Act and how and why this solution was arrived at. The principles seem sensible enough. Firms are obliged, among other things, to conduct their business with integrity, skill, care and diligence, to take reasonable care with management and control, and to and pay due regard to the interests of its customers and treat them fairly—all of which seem sensible. But how they have been interpreted has often been a matter of subjective judgment. Smaller businesses especially have found aspects of the regulation baffling, lacking transparency, and unpredictable. They therefore play safe and avoid risk, often at the expense of growth. My noble friend Lady Noakes and the noble Baroness, Lady Bowles, referred to one of the proposals, which is to take out having regard to such principles. The noble Baroness, Lady Bowles, added that the problem is that they need to be applied properly.

I will say a few words about the application. The financial services lawyer Barnabas Reynolds has explained that the principles used, as applied by the regulators, can lead to considerable uncertainty, given the “subjective”, often idiosyncratic, judgments of the regulators. They are applied to

“pin blame on firms and senior personnel regardless of whether relevant rules or guidance existed when the event occurred”,

since the principles are not

“used in the manner of normal common law … to inform the interpretation of specific rules.”

As a result,

“the industry is unable to determine in advance whether many specific actions are permitted or not”.

This is a problem of application.

Indeed, the evidence given to the Select Committee bore this out. Take Principle 12, on the consumer duty, the intended outcome of which was for

“consumers to have confidence in retail financial services markets, with healthy competition based on high standards and … good customer outcomes”.

Witnesses explained to the committee that the implementation had generated uncertainty, saying that

“the FCA has provided insufficient clarity around how it expected firms to comply with the Duty, and that it had created duplication and complexity within the framework”.

They said that

“implementing the Consumer Duty has been difficult due to … ‘the ambiguity of the rules’ and the lack of clarity provided by the FCA”.

This is in respect of the application of these rules, about which the noble Baroness, Lady Bowles, has spoken as well.

The Bill’s accountability mechanisms should be strengthened, which could help deal with this problem of application. As we have heard, noble Lords have objected to removing them altogether and have spoken about the danger of nobody knowing what on earth they will be judged by. I will consider how we can insert clear obligations under law which can be judged in the courts—obligations for predictability, fairness, objectivity and transparency under law.

These could be further promoted by obliging regulators by statute to supervise and enforce predictably, in accordance with their rules, ensuring that their decisions are consistent between firms which operate businesses of the same size and scope. They should be obliged to publish examples of predictable rulings for firms and how they were reached. In this way, there would be greater transparency, predictability would be enforced and firms, as a result, would be encouraged not to be risk averse and would be certain in the knowledge that what the rules say they mean can be established and, if not predictably enforced, can be challenged in court under law.

Financial Services and Markets Bill [HL]

Baroness Lawlor Excerpts

Committee stage
Monday 22nd June 2026 Grand Committee

[Lord Carlile of Berriew (CB)]

My Lords, I speak with diffidence on this matter, as I am not an expert on consumer credit. I have been involved in many cases over the years when consumers have been dissatisfied with the consumer credit arrangements that they have undertaken and have felt that there was a serious breach of contract. I am concerned that we are suggesting here that parliamentary process is the answer to many consumer credit complaints, even though parliamentary process is just about the least living instrument in our possession. It seems that the purpose of Clause 1 and Schedule 1 is to ensure that what is created is a living instrument that will modernise the consumer credit framework—not weaken consumer protection—and will become more effective because it sits in FCA rules rather than in primary legislation. It has been suggested that FCA rules are not subject to the courts, but there is already an elaborate system in place in the FCA rules.

In this debate so far, no one has mentioned the Consumer Duty, an extremely detailed document that has been in existence for three and a half years and that has, in my view, served the FCA well. If you look at the comments from law firms, which one can find all over the internet, the result is that there has been a much more informal resolution of difficulties than relying on the old system before the Consumer Duty was created. Therefore, I believe that FCA rules are part of a living instrument: they are binding, enforceable and subject to consultation and scrutiny. At the end of the day, if someone breaks the law, they are of course subject to the courts as well. That goes without saying and to suggest the contrary would be nonsense.

[Baroness Lawlor (Con)]

My Lords, I hesitate to follow the noble Lord, Lord Carlile, who, although he is not a specialist in this area, is a lawyer. I will speak in support of this group of amendments; I would have done the same for the first group, had I been here. It is important that businesses and consumers alike have the protection of a law that is predictable and transparent and where no doubt arises about its interpretation. Many doubts have arisen around the judgments and rulings of the FCA and its lack of consistency. Therefore, I am sympathetic to the wish of the noble Baroness, Lady Bowles, to have something done on paper, so that we can see something before putting it through.

Both businesses and consumers are used to having a legal surround for such transactions. They go back to the 1850s in the Bills of Sale Act 1854, which was modernised throughout the end of the 19th century and then followed by the Money-lenders Act 1900, obliging the registration of moneylending and allowing the courts to be involved. It is important that we have judicial oversight, not just by updating the process—although I agree with noble Lords on that—but with a legal framework that is transparent and consistent and that allows people to see what is expected.

I am also concerned about the impact of rushing through legislation to empower an as yet uncertain regime of rule-making, about which nothing of substance is known. The FCA appears to be as unprepared for this as others. In its response last month to the Treasury’s announcement of the reform of the Consumer Credit Act, the FCA said that such reform

“is an important step towards a more flexible regime that supports effective competition and innovation, while maintaining appropriate consumer protection both now and in the future”.

It acknowledged that it would put

“greater emphasis on FCA rules and guidance rather than prescriptive requirements set out in legislation”.

It states that it intends

“to consult on the key elements of the … framework … set out in legislation”.

One problem with being flexible—or moving to what the FCA calls

“a more flexible regime that supports effective competition and innovation, while maintaining appropriate consumer protection both now and in the future”—

is that flexibility can be inconsistent and lack transparency. What is appropriate for one firm may not be so for another. It brings doubts into the minds of businesses. We have heard of businesses being concerned about the arrangements run by the FCA. For example, given that many of the requirements to disclose information in the CCA and associated regulations are to be repealed, how transparent will the rules be? How consistently will they operate? Will the FCA’s rulings be published? If they are to be less prescriptive and more in line with the FCA’s consumer duty principle, how certain can businesses be about what counts as being in scope?

Before closing, I would like to mention another concern: the considerable compliance costs. Most of the disclosure of information obligations on the CCA, and in the linked regulations being repealed and replaced by FCA rules, will bring costs. I am grateful to Addleshaw Goddard LLP for its analysis, published on its website, which suggests:

“Reforms in relation to arrears, default notices & in-life information are likely to create major operational impact for collections and arrears handling. Given the high litigation risks attached to these requirements firms should carefully consider these changes and monitor how these requirements will be re-designed in FCA rules”.


Here, we should think of the start-up costs for this new system, along with the continuing compliance costs, which will be considerable. Take, for instance, the information requirements. How will they affect the estimated 30,000 firms that will have to amend documentation that does not align with the consumer duty?

With those thoughts, I support the thinking behind the stand part notice in the name of the noble Baroness, Lady Bowles, with its question mark around the wholesale transfer of such powers without any information on how they will be operated or regulated—or, indeed, what they will be now.

[Lord Altrincham (Con)]

My Lords, I declare my interest in South Molton Street Capital, which is regulated by the FCA.

The amendments in this group reflect concerns similar to those raised in our previous debate. As the noble Baroness, Lady Bowles, and my noble friend Lady Neville-Rolfe have argued, it is for the Government now to set out a compelling case for moving Consumer Credit Act provisions into the FCA rulebook. This is a serious new precedent and they must meet it with an equally serious explanation. Regulatory flexibility, or, as we have heard from my noble friends, the living instrument arguments, may be appropriate for matters of form, process and technical detail. However, that flexibility comes with risks. Consumers, firms and the courts all benefit when substantive rights and remedies are stated clearly in law. Notwithstanding the comments made by the Minister, moving them into regulatory rules may reduce their visibility, create uncertainty about their permanence and make their enforceability less clear. I hope that the Minister will be able to assure us further on how the proposal before us will avoid that issue.

There is an important constitutional principle at stake. If rights established by Parliament can, in effect, be rewritten through regulator-made rules, Parliament’s role in determining the proper balance between consumer protection and regulatory proportionality is diminished. More broadly, public confidence depends on protections being visible, accessible and readily understood. This is particularly important in consumer credit, where people may be making difficult or significant financial decisions while facing difficult or vulnerable circumstances. Rights are of limited value if consumers cannot identify or understand them and cannot be confident about how they will be enforced.

Fundamentally, we need a lot more clarity on this process and on what the Minister described as the orderly transition. We shall listen carefully to his response on this group, in addition to his previous reply.

Financial Services and Markets Bill [HL]

Baroness Lawlor Excerpts

Committee stage
Wednesday 24th June 2026 Grand Committee

[Lord Massey of Hampstead (Con)]

My Lords, the Bill reflects the very substantial transfer of power, as mentioned by my noble friend Lady Neville-Rolfe, from Parliament and from existing regulators, such as the PSR and the 22 professional bodies with specialised knowledge of the sectors, as we discussed earlier. This reflects a high degree of centralisation of regulatory supervision, which may lead to a lack of clarity and, in some cases, as my noble friend Lord Mackinlay mentioned, double regulation for small firms. As the noble Baroness, Lady Bowles, said earlier, the system is also already overloaded. In that context, given the extensive proposed changes and the real possibility of unintended consequences, it seems that the Government should consider the setting of strategy for the future as an important component of the Bill.

Although I support all the amendments in this group, I emphasise the need for consultation with regulated firms and the regular review of the rulebooks as provided for in Amendments 71, 72, 74 and 75. The Bill indeed provides for the publication of a document and consultation with one party—the Court of Directors of the Bank of England is specifically mentioned as a party that will be consulted—but seemingly not with any regulated firm, despite the fact that regulated firms could clearly be very helpful in the setting of long-term strategy. Amendments 71 and 74, proposed by my noble friend Lady Noakes, therefore seem essential additions to the Bill, as would Amendments 72 and 75, proposed by the noble Baroness, Lady Bowles, and the noble Lord, Lord Vaux.

[Baroness Lawlor (Con)]

I say a word of support in favour of these amendments. This industry, financial services, is one of the most innovatory and dynamic industries in this country and has led the world in its imaginative, entrepreneurial approach for centuries. What we are seeing—I am glad to follow my noble friend—is the centralisation of regulation in one ever greater regulatory body. This will mean that the slowest ships of the regulatory convoy will determine the pace.

For these reasons, it is imperative that the strategic review takes account, much more regularly than every five years, of the updating of business actions, business transactions and the tools used by the sector; and that, as my noble friend Lady Noakes pointed out, it talks to the people who are the wealth creators whom it will regulate. For all the reasons that have been enunciated in the course of this short debate, including those from the noble Baroness, Lady Bowles, I support these amendments.

Financial Services and Markets Bill [HL]

Baroness Lawlor Excerpts

Committee stage
Wednesday 1st July 2026 Grand Committee

[Baroness Noakes (Con)]

My Lords, I have added my name to my noble friend Lord Bridges of Headley’s amendments creating OFRA. I also support the amendment from the noble Baroness, Lady Bowles, which would use a panel to look at how the regulators are performing. The key thing is that we need more external heavyweight oversight of what the regulators are doing. As noble Lords have identified throughout this Committee, accountability is the key issue that we are focusing on, in particular because of the way in which the Bill weakens the current accountability constructs.

My noble friend Lord Bridges referred to the previous time that we were debating the same amendments, when we were sitting on the other side of the Room—I remember it very well. At that time, as my noble friend knows, I did not support his amendments because I was dead set on trying to get either a House of Lords Select Committee or a Joint Committee of both Houses involved. The original version of what is now FSMA 2023 had the involvement of only the Treasury Select Committee in the other place and we were clear that this House had far more expertise in financial services, and that it was important to leverage that either through the use of a dedicated Select Committee in your Lordships’ House or a Joint Committee. There was no appetite for a Joint Committee from the other place. We ended up with a committee, but it took an amendment to the then Bill in 2023, on which I focused all my effort last time. Also, as I said to my noble friend at the time, I did not think that we needed yet another unaccountable public body.

The Financial Services Regulation Committee has been in operation for about two and a half years, and I am now clear that the scale of the task is very large and very hard to execute without the kind of independent analysis that we would get from having something such as OFRA or a panel to assist in the task. It is just too big a task for one Select Committee in your Lordships’ House to handle. We meet weekly, as is customary for all Select Committees, but we have limited staff resources, in common with all other Select Committees of your Lordships’ House. We do pretty good work on that basis, but we cannot cover the whole area, nor can we look at as many things as we would like; we have to be selective about what we look at. We cannot take a comprehensive look at the accountability of the regulators; that is the missing piece now. We need something that is resourced and able to look at it in the round.

I support all the amendments in this group because anything would be a big improvement on what we have to date. I bring good news for the Minister: I have, today, tabled another idea for improving accountability, based on discussions with some people in the industry, which some Members of the Committee already know about. I tabled that this afternoon so I hope that we will be able to debate that on Monday.

The only point I am trying to make is that we are looking for options to improve accountability, which was already under pressure, but we now have huge new consumer credit legislation coming in that will mean lots of regulations and rules being issued over the next couple of years. There is quite a big task coming down the line, and we have to do something about it in the Bill.

[Baroness Lawlor (Con)]

My Lords, I have added my name to Amendments 133 and 135, in the name of my noble friend Lord Bridges, and I shall say a few words about them. I have also tabled Amendment 135A, which amends Amendment 135.

Two of the questions raised by the Bill are how will the regulators operate, make, impose and judge the rules and how will Parliament’s proper role in the legislative process be ensured? In some cases, not only do we not know what we are supposed to be legislating on, as the Committee has discussed, but we do not know the basis on which the regulators will, in practice, be held to account. Indeed, as matters stand, the arrangements and the deployment of powers is not known, or not entirely, in many cases.

The amendments tabled by my noble friend Lord Bridges and supported by my noble friend Lady Noakes and the noble Baroness, Lady Bowles, to which I have added my name, would establish an office for financial regulatory accountability, which would have the specific duty of examining and reporting on the performance of the FCA and the PRA and how they perform on specific measures, would provide some of the essential answers. The office would assess how far the regulators meet their statutory objectives and principles under FSMA 2000 and, importantly, the effect of specific pieces of regulation. We need to know the impact of these regulations on the domestic development of the financial services and the market, as well as the impact internationally, and we need to know the costs and burdens of compliance. Amendment 135 contains very specific duties, and I think they have been very well thought out. I hope the Minister will take them into account and consider why we need this office, which will be independent of the process of regulation. It will be independent of Parliament, not just of the regulators, and it will help Parliament to do what it ought to do as the legislature.

My Amendment 135A would include in these independent reports examples of how the rules have been implemented and applied to different firms, including similar firms doing the same kind of activity, because we do not have an independent analysis of those rules and regulations, the process or the compliance. Very often, small businesses are at sea; they cannot look to Parliament because we do not have the basis for assessing them, they cannot look to our reports, and they cannot necessarily look to the regulators. They tell me about this and quite often explain that they are not sure. They want to take a step to grow their business, perhaps to develop some new instrument or to expand their market, but they are not quite sure how the regulators will treat it. They have no example of how these things have been seen in the past or of how the rules have been applied.

Requiring an independent office for financial regulatory accountability to provide some examples will help not only Parliament but businesses in being competitive and growing their businesses. They will see the precedents and be able to predict much more easily how the system operates. It is not an expensive way in which to make judgments. They do not have to get in expensive consultants or do little trials here and there and pilots. They would give security in knowing where the boundaries are set and judged and whether they are consistent with the opportunities they need to seize if they are to make their businesses grow.

Above all, such an office reporting and assessing these duties would encourage the regulators to be consistent and predictable and to focus on their statutory objects. As the Bill aims to focus on the competitiveness and growth objective—we have talked a lot about reporting requirements and the overall strategic plan—there is a problematic lack of transparency and accountability by the regulators, other than to the Treasury, and that relationship sometimes seems a little too cosy.

The amendments tabled by my noble friend Lord Bridges would promote an affective mechanism to ensure that we have objective, transparent and impartial evidence externally provided by an independent body. I support them for that reason but add my small amendment so we have greater transparency in how they are applied.

[Baroness Donaghy (Lab)]

My Lords, I do not want to get involved in the mechanics of the group in how we get this independent scrutiny, but I want to emphasise that it is important. We would welcome a discussion with the Minister about how it is done. We have had various inquiries over the past two and a half years, and I would ask the federations and organisations whether they thought having a concierge service would be useful to overcome some of the difficulties that the noble Baroness, Lady Lawlor, has outlined, especially to help the new boys on the block and the smaller companies to find their way around the complex barriers that they have to face. It seemed to be quite a popular suggestion, but nothing ever came of it.

The example was used was the Singapore settlement, although I am wary of international comparisons, and it is right not to follow too much because they are different, but it has a kind of concierge service to help new companies. Where we have a difficulty—I am thinking back on the history of the relationship between Governments and regulators—is that regulators are subject to political pressures. You might not agree, but that is the fact and the real politics. When things go bad, the regulator will be blamed, so they are cautious. Their very nature makes them cautious because they do not want to be the ones that go on holiday and get the sack because something has gone badly wrong. We need protections for the methodology that the regulator uses. I have to say that the cost-benefit analysis panels are on the nursery slopes. I was rude about them last week, as the Minister knows, and I do not want to be rude again, but they need nurturing. The work that they could do will be really good if they are given more clarity on their possible role so that they cannot be fobbed off by the regulator. I am not suggesting the regulator will fob them off, but there would be a tendency to stick to the law and not go beyond that.

I feel that we need to build this into a system not just because we want to protect the existence of a committee that we think is important, although I do, but because parliamentary scrutiny is important, and we sometimes search for the objective facts and figures, the granularity of why a regulator does something or neglects to do something and to what extent political pressures are involved. I know that no system, even the system that the noble Lord, Lord Bridges, has asked for, will ever get to the bottom of some of that—we are not naive—but I believe we need more transparency and, yes, less complexity, but we need a system that has more checks and balances. I think a lot in this legislation is going the wrong way and what we need to do is carefully assess what is working well, what needs to be nurtured in these very early days and what we need to be avoiding like the plague.

Financial Services and Markets Bill [HL]

Baroness Lawlor Excerpts

Committee stage
Monday 6th July 2026 Grand Committee

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I broadly support Amendment 142A, and I thank the noble Lord, Lord Hunt, for bringing it forward. I also think that the amendment in the name of the noble Lord, Lord Ashcombe, or something similar would obviously be needed as some kind of companion to it.

Whatever the FCA may have been intended to be, it is now proudly and explicitly a consumer protection body. For much of its work that is good, but some noble Lords will know that it has taken me and others four years to get incorrect cost disclosure descriptions for listed investment companies corrected, simply because consumers like the incorrect versions. Indeed, that saga led to a telling exchange at a meeting of the Financial Services Regulation Committee. The FCA chair insisted that consumer views always took priority, and I replied, “If you ask whether one and one makes two or three, and the consumer says, ‘I like three—it’s a bigger number’, is that what you use?” There was no denial. That is the scale of the problem: a regulatory culture where consumer preference for something factually incorrect overrides market integrity. It is a mindset that has already cost billions in potential investment in productive assets.

That was where it touched consumers; now let us move on to look at the wholesale areas. The trouble is that that mindset gets pasted across too. We do not need to debate whether the FCA went overboard in demanding that wholesale businesses had to proactively prove that they do no consumer harm in transactions that never touched consumers. The admission is there in consultation CP26/23 at paragraph 1.3, acknowledging overreach, as well as acknowledging

“unnecessary cost, complexity and uncertainty, without clear benefits for retail consumers”.

However, having finally identified the cancer, the regulator is merely applying a sticking plaster. All that is being offered is the mildest semantic tweak to guidance—effectively, a guide to guidance. It has no legal effect. It allows the regulator to continue its current trajectory with a slight adjustment to its vocabulary. We all know that this change was extracted only after heavy nudging by the Chancellor and intense parliamentary scrutiny. It is hardly being done with good grace and provides no guarantee of permanence.

The fact is, we must deal with the FCA as it is, not as it might have been. Since the advent of the consumer duty, the retail-first culture is irreversibly embedded into the psyche of staff, and in many instances it is the reason why they joined the regulator in the first place.

Perhaps one of the most telling things is to look at what is said about other regulators. On the Monetary Authority of Singapore, which I found a very enlightened body on my visit there some years ago, the comment is, “Although MAS is a unitary regulator, it splits its internal policy divisions strictly by target market rather than by trying to govern everything under an overarching outcomes-based code like the UK’s consumer duty”, and, “It works because the wholesale division, answerable to the MAS leadership, is judged primarily on market liquidity, innovation and international competitiveness. There is zero risk of a consumer advocacy group hijacking a wholesale policy consultation”. I wonder where they were thinking about. A ring-fenced, structurally separate wholesale unit within our regulator’s architecture must live up to that standard.

Some may argue that all wholesale activity impacts retail eventually, and I agree, but there is a massive, fundamental difference between regulating wholesale markets for the integrity of the system, which protects everyone, and regulating as if they are a high-street retail shopfloor. The former ensures safety, the latter ensures paralysis. For any noble Lord worried about this structural change, nothing being suggested would remove liability for wrongs or harms to consumers, should that occur. Let us be clear: this amendment is not an attempt to escape oversight; it is an attempt to ensure that oversight is competent, technically accurate and focused on the reality of the market being regulated. Let nobody forget that MiFID and other legislation already provides a rigorous framework governing transparency, best execution and conflicts of interest. This is no soft ride: this amendment is a necessary structural correction, and I support it.

[Baroness Lawlor (Con)]

My Lords, I support all the amendments in this group, but I shall confine my remarks to Amendment 165 and the linked Amendment 173 from my noble friend Lady Neville-Rolfe for an FCA operational readiness report presented by the Treasury. Amendment 165 would mean that Parliament has the opportunity to ensure, by a Treasury report, that we have an assessment of the FCA’s operational readiness to exercise any significant new regulatory function conferred by the Act of staffing, resourcing and the capability of the systems in place and of the impact expected on authorisations, supervisions and enforcement timeliness. This will be a formal report to Parliament. Until we have such a report from the Treasury that the FCA is operationally ready, Amendment 173 would ensure that the Act cannot start.

My Amendment 165A proposes that the report must also assess readiness in terms of preparatory training and the interpretation of the application of the Act. Such a requirement should prompt the FCA to deploy and train existing staff with the specific knowledge and understanding of the new powers they will operate under the Bill and to therefore be up to date and competent to regulate firms under the law. It would require the Treasury to report to Parliament and, in this way, there is a measure of accountability.

It might be contended that this requirement is otiose, but the FCA’s workforce is around 5,000, recruited from candidates with a diverse range of skills under different headings. Finance and operations make up 46%; engineering makes up 30% and sales and marketing make up 23%. The median employee tenure is 4.2 years. Regulators come to their post with a diverse range of skills; some are highly experienced and others less so. Today, 17 posts are advertised that cover a wide range of jobs and responsibilities for which different skills are required. For example, there is a senior insurance supervisor job, a financial crime marketing interventions associate, an L&D associate, a lead for global strategy and engagement, a primary markets supervisor, a senior crypto and payment supervisor and a technical specialist in AI—my noble friend Lord Holmes will be pleased to hear that.

The skills range required can include the common skills we would expect or generic skills, for instance, in data systems. The senior crypto asset and payment supervisor responsible for working in this developing sector, who will lead difficult cases, identify risks, deal with crossborder problems and help prevent crime, is also expected to “drive improvements in standards”.

These are important and demanding tasks. They also operate in a rapidly developing area. Given the nature of the system and that the principles still apply, regulators are internally accountable for what will be subject to interpretations and judgments. There should therefore be the requirement of at least general and specific knowledge, and competencies for each role but, as financial products continue to be developed and the framework of law continues to change, there must also be continuous learning and updating in the law and the powers given to the regulators under it, rather than assuming that somehow the regulators will be equipped and operationally ready to do the job.

--- Later in debate ---

[Lord Massey of Hampstead (Con)]

My Lords, I should again declare my interest as chairman of Canaccord Genuity Wealth Management, as set out in the register of interests, although I should also state that Canaccord has no appointed representatives, which is the subject of this amendment.

I do not oppose these reforms in principle, although we should recognise that in Clauses 24 to 28 and in other measures we are adding significantly to the regulatory burden of member firms. It can certainly be argued that there is a case for greater oversight of appointed reps, as too many principal firms have historically taken a light-touch approach to supervising the firms acting in their name. Where that has gone wrong, consumers have borne the cost. However, regulation of this kind is always a question of balance, and my purpose in moving this amendment is to ask whether the Bill has struck that balance correctly.

By way of background, this part of the financial sector, affecting mostly retail clients, is surprisingly large, and its fortunes bear directly on financial inclusion, a subject on which the Committee shares a common concern, mindful, as we all are, of the advice gap. The numbers are meaningful. There are approximately 34,000 appointed representatives, according to the FCA, and they generate £11.1 billion in regulated revenue and a further £27 billion in non-regulated financial services revenue, so some £38 billion in total is running through this part of the market. The number of appointed reps fell by 12% in the 3.5 years from 2022 to 2025, but there was a more pronounced fall in the numbers of principal firms—that is, those that appoint representatives. That population has fallen by 26% over the same period, so we are seeing quite a decline in participation in this space.

Why does that matter? Appointed reps are overwhelmingly small firms, often sole traders, regionally based, who work closely with smaller clients. They cannot afford the administrative and compliance burdens of larger firms, hence the need to operate under their regulatory umbrella. They are a significant channel through which smaller clients can access the markets and receive highly personalised service and advice. I am not sure we want this part of the business to be under threat of more serious decline as an unintended consequence of some provisions in the Bill.

Clause 24 introduces a new discretionary FCA gateway before a firm may act as a principal at all. Principal firms will now have to seek specific approval to have appointed reps, and if they enter the business—this is an important point—the FCA can remove their permission at its discretion for vague reasons. Alongside that, the FCA will gain the power to create a bespoke senior management function specifically for AR oversight, layering on a new form of personal regulatory liability to firms taking on ARs. ARs will now be brought into scope of SMCR and will therefore be subject to misconduct rules, so principal firms will have to carry out fit-and-proper tests on ARs, as they do now for their own employees. Furthermore, the compulsory jurisdiction of the FOS is now extended to ARs, which means that principal firms will be held responsible for complaints against ARs in most circumstances. These are significant new duties that represent potential liability risk and a lot of additional cost to principal firms.

We should bear in mind that some of these principal firms are not large organisations, and they may find these new exposures quite onerous, which in turn might render the economic risk-reward of having ARs less attractive. Overall, the clear direction of travel here is to have fewer but larger principal firms. Indeed, this might be the FCA’s agenda for this part of the business.

Amendment 144A calls for the FCA to look before it leaps. It calls for an assessment of the impact of the new rules on the number of principal firms, the number of appointed reps and, most importantly, consumer access to advice, particularly for those on modest means, and the viability of smaller principal firms.

I am not necessarily asking the Government to reverse course, but these measures represent a significant increase in regulatory burden and there is no getting away from that. I am asking for the regulator to measure the impact of what it is doing before the provisions take effect, and to bring forward mitigating proposals if the impact on consumer access turns out to be material. Given that the FCA’s own data already show a firm population in genuine retreat and the implications for the advice gap, this seems to be a modest, proportionate and uncontroversial request. I beg to move.

[Baroness Lawlor (Con)]

My Lords, I will say a few words in support of my noble friend Lord Massey’s amendment. We should not forget that many of these small firms coming into the market are to be valued in Britain’s highly competitive industry—until there was too much regulation, perhaps—and we rely on them. They are what distinguishes the UK’s financial services historically. From the 16th century on, the growth of financial services and the City of London depended on small people coming together to provide for a niche in the market that people wanted.

If we continue to put too much burden on these small firms, they will not emerge. We have heard from my noble friend Lord Massey how important they are, sometimes locally. They are small firms which meet a need, so it is a very good idea to have an impact assessment of what the costs will be for ARs before the law comes into operation, for the competitiveness of the UK’s sector.

[Lord Reay (Con)]

My Lords, we support the questions that this probing amendment is asking. My noble friend Lord Massey of Hampstead has put forward a sensible and important amendment, because it asks the Government and the FCA to consider the practical effects of the Bill’s changes on appointed representatives before those changes are brought into force.

This model is used widely across financial advice, mortgage broking, insurance distribution, wealth management and consumer credit. It is particularly important for smaller advisory businesses which may not have the scale, resources or compliance infrastructure to seek direct FCA authorisation themselves. There are good reasons why businesses use this model. It can reduce regulatory costs, allow faster market entry and give smaller firms access to compliance expertise, training and regulatory support. It can also allow advisers to spend more time serving clients, rather than navigating the full cost and complexity of direct authorisation. That has real consumer benefits.

Many appointed representatives are small local firms or regional advisory practices. They often serve clients who may have more modest assets and need mortgage advice, pension advice, insurance advice or investment guidance, but who may not be attractive to larger firms focused on wealthier clients, so we should be careful. If the effect of the Bill is that principal firms face significantly higher costs or liabilities, some may reduce their appointed representative networks or withdraw from the model altogether. That could mean fewer advisers, less competition, less local provision and reduced access to financial advice, particularly for retail customers with smaller portfolios or less complex needs. That is the concern which Amendment 144A seeks to test.

That assessment would consider the number of principal firms likely to continue AR relationships, the overall number of appointed representatives, the effect on consumer access to regulated financial advice, and the impact on smaller principal firms, whose compliance costs may be disproportionate. That seems to me to be a reasonable thing to ask. The policy objective should be to improve standards and reduce harm, without undermining a model that supports competition, market entry and access to advice.

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[Lord Vaux of Harrowden (CB)]

My Lords, I will be very brief. I am sympathetic to ensuring that the overseas recognition regulations are as pragmatic and seamless as they can be to enable easier international competition. But I have quite a lot of sympathy with the comments of the noble Baroness, Lady Noakes, about giving these powers exclusively to the Treasury.

I want to ask one question of the Minister. New Section 408A(2) sets out a list of areas that

“the Treasury must have regard to the importance of”

when making regulations. As an aside, that is quite odd wording; normally it is “have regard to”. I am still not sure I understand what difference

“must have regard to the importance of”

makes to the meaning. Maybe the Minister might explain that. New Section 408(1) does something similar but in a slightly different way. It seems that one area is missing from the lists of “have regards”: the question of economic crime, particularly anti-money laundering and the transparency of ownership in the relevant jurisdictions. Can the Minister say whether he agrees that those are important and explain why they might be missing from the list?

I will just finish with something I should have said earlier today, given that I think we are finishing early and the Minister is going to get some of his evening back: I wish him a happy birthday.

[Baroness Lawlor (Con)]

I endorse the concern of the noble Baroness, Lady Noakes, about the political pressure that the Treasury will be under to recognise certain countries. Without adequate scrutiny, wider advice and deep analysis, the problem of overleveraging in some banking systems, despite them appearing perfectly respectable, would expose the UK and its financial sector to the dangers of debt and contamination.

I therefore have doubts about the economic implications of the Treasury making these calls on account of political reasons. We see this all the time, whether on international agreements—I sit on that committee—or on European affairs, whose committee I previously sat on. There is constant pressure by Governments to sign treaties that are rather bad for the UK and its various sectors, including financial services. I would have concerns if there were no adequate scrutiny and no proper advice taken on whether such recognition is a good thing for our systems.

[Baroness Kramer (LD)]

My Lords, I will speak briefly. As the Committee will know, I have expressed before my concern about heading towards a lowest common denominator. The constraints on the engagement of the regulator and Parliament in a process of recognition of overseas regimes is crucial. It provides transparency and challenge, both of which are constantly necessary. So these are well-drafted amendments from the noble Baroness, Lady Noakes.

I want to go a little further. The noble Lord, Lord Holmes of Richmond, is not in his place, but he has tabled Amendment 164D, which would go further in seeking to instruct the Secretary of State to establish memoranda of understanding with a whole series of regulatory authorities. I have significant concerns about that, without the same set of constraints. We must be aware that, at the moment, there is fragmentation in the world in which we are living. International agreements are often treated as “pick and mix”. I object when we do that in the UK, but it is certainly a behaviour that we are watching in the United States at all times. We can see it with the development of AI and the various steps that the White House is taking. It is hard to work out whether or not it will go for AI licensing. A memorandum of understanding that passively accepted whatever the United States decided was the appropriate standard would trouble me hugely.

This is a very good set of amendments. Although the noble Baroness, Lady Noakes, and I often take very different positions on regulation and the primacy of financial stability, in this instance, she is absolutely right. There is nothing more troubling than reading all three objectives be put on a par. That has been my great fear. Anyone looking back on what happened in the 2008 crash will see that a focus on competition and growth without any focus on financial stability led to a crisis that I suspect nobody in this Room wishes to see again.

Financial Services and Markets Bill [HL]

Baroness Lawlor Excerpts

Committee stage
Wednesday 8th July 2026 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, it has been an unusual experience to have had a debate with two sides to it on the Bill; the Minister must be pleased about that. I am afraid that I sit firmly on the fence—indeed, on the ring-fence. I am in two minds on this issue. Ring-fencing requirements were put in place after the financial crisis for very good reasons. You can argue that they went too far and that, to some extent, they have been overtaken by other regulations and that they perhaps overburden and create some restrictions on the banks. But, in the Bill, the Government recognise that.

On the other side of the equation, the economy and the banking system are currently facing a whole range of threats, which are arguably greater than have been faced at any time since the financial crisis in 2008. We have the private credit situation and the impacts of AI, to name just a few. Is it really the right time to remove ring-fencing entirely?

I am also not entirely convinced by the argument that removing ring-fencing would have that much impact on domestic lending. Domestic lending is inside the ring-fence. In fact, you could argue that it would have the opposite effect, as banks could then use deposits for more risky non-lending activities. Therefore, I confess that I find that argument unconvincing.

I am open-minded, but I am more minded to support the government proposals to loosen the ring-fencing rules and introduce some flexibility to them. I do not think I am ready to support complete removal at this stage. However, I am drawn to Amendment 159, which requires a consultation and assessment to take place before the proposed changes can be made.

[Baroness Lawlor (Con)]

My Lords, I am delighted to have the debate, and I am very grateful to the noble Lord, Lord Pitt-Watson, for raising questions which have encouraged debate, but I support my noble friend Lady Neville-Rolfe’s opposition to Clause 39 standing part of the Bill. I also support her Amendment 160A about ring-fencing.

Clause 39 gives the Treasury powers to loosen the ring-fencing scheme. It has been anticipated, as others have said in this debate, by a number of announcements and reports, not least the Skeoch report—I hope I have pronounced it rightly, in the Celtic way—and the announcements this year by the Treasury itself. All of these point to and address a real problem. The question before us today is whether the Government’s solution in their Clauses 39 and 40 is sufficient to deal with the problems raised by reviews and announcements going back to the 1 March 2022 independent review of the working of the scheme.

I have a concern. The clause may seem to be the answer to some of the serious questions raised in that review and other concerns, and allow for the mitigation of problems arising from the ring-fencing regime—to allow for “proportionate” changes, to use a word which continues to recur throughout the assessments of how the scheme is working. However, in essence, it protracts the dominance of the regime and the regulators in what should be business decisions under good law, which is the spirit of the common law. It is a law which is permissive of risk-taking rather than prohibitive of the spirit of enterprise, or looking over the shoulder to the precautionary principle.

Officials and regulators can be very intelligent, competent and talented people, but it is not part of their skill set to drive through an entrepreneurial idea from the drawing board to production, sale, expanding their markets, developing a business, taking risk, and hiring and training people—which is an additional cost—while all the time keeping on top of the services sector, one of the fastest growing sectors in the UK and a jewel in the crown. Enabling officials to decide which activities should or should not be prohibited, and under which circumstances, does not tackle the fundamental problem to which the ring-fenced regime has given rise: the artificial and contrived structure. We are dealing with a structural problem—an artificially separated structure.

This structure inhibits the financial services sector from functioning in the best possible way, as an enabling hub for the whole UK economy, to allow small businesses, in particular, to grow and credit to flow. It is unlikely to remedy what we are dealing with, the fundamental problem of risk aversion imposed by ring-fencing law on businesses and the endemic risk aversion in the operation of the law.

[Lord Pitt-Watson (Lab)]

I wonder whether there might be some confusion here. The thing about the ring-fence is that there are activities within it that the Government are promising to bail out. Those things are being insured. By the way, the move in the ring-fence proposed by the Government will extend these a little, but they include lending to the small businesses that the noble Baroness has talked about. The question is: are we going to be rid of that? Is it the case that the implicit guarantee that the Government are giving can go to any other activity that the bank decides that it wants to undertake? That could include, although Skeoch would say it is not a problem right now, the sort of proprietary trading that brought the American banks down in 2008—of course, they had been allowed to do that because Glass-Steagall had been removed 10 years earlier. What we are talking about here is: how much of bank activity will the Government stand behind? As Mervyn King said, we must make sure that it is just the very most important things.

[Baroness Lawlor (Con)]

I thank the noble Lord, but it is about where the line is drawn in law, so that businesses can be certain and have predictability, because activities change day by day.

[Lord Pitt-Watson (Lab)]

With respect, that is what Skeoch is recommending and what is being allowed in what we are being asked to accept here—there is an extension of the ring-fence. He is saying, “Look, there are other important activities that go beyond the ring-fence that are administratively complicated for the banks. Please can you move this? Also, can you move this in a way so that it doesn’t need to go to primary legislation any time it needs to change, because all these things are moving?” What we are trying to do here is recognise that the independent commission is run by a senior financial businessperson—he used to run Standard Life—whom we are going to back. He indeed said that, in the long term, you may want to think about how ring-fencing goes together with the resolution regime, but that is not for now. He certainly did not say that we should abandon it.

[Baroness Lawlor (Con)]

I thank the noble Lord, but he was speaking about 2022, which was light years away for the financial sector. Things have moved on and have changed. We have different regimes in place now. As my noble friend Lady Noakes has explained, the banks are now resolvable. There are other schemes that will avoid the problems for the taxpayer. That should be borne in mind.

I had better finish quickly. That is my objection. It is about who decides for businesses. If you have a ring-fence, ultimately, no matter how much you relax it, the Government are never going to have the knowledge of the sector, and the detailed tactical and strategic ability, to be ahead of the game and make businesses grow. They will always play slightly safe, but maybe they are over-safe.

I will finish on why we need to repeal the ring-fence, not just why Clause 39 is not good enough. In a sense, we are seeing the inhibition of risk-taking and a structure that inhibits it. As other noble Lords have pointed out, we do not have parallels in other economies. I know that there is the Volcker rule in the US, but Switzerland has solved its “too big to fail” problem without a ring-fence and it has a very instructive banking sector. France and Germany have it individually but not the EU, which rejected it. Australia reviewed it again in 2019 and rejected it on the grounds that noble Lords have mentioned. It is well worth going back to the famous Skeoch review, which contends that, in the longer term, we will not need the ring-fence and we will have resolution schemes in place. For those reasons, I support my noble friend’s opposition to the clause standing part of the Bill and her Amendment 160A.

[Baroness Altmann (Non-Afl)]

My Lords, I support Amendments 159 and 174 in the names of the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Altrincham. I would be concerned about abolishing the ring-fence for similar reasons and concerns as those expressed by the noble Lord, Lord Vaux. However, I believe that a review of the workings of the alternative protections, such as the higher capital cushions and the bail-in regimes, would be appropriate. I also think that consultation would be advisable rather than simply removing these clauses. We are talking about taxpayer risk; that is basically what the ring-fencing is designed to mitigate. When it comes to consumer deposits, we have done an awful lot for retail savings to make sure that there is protection.

I apologise that I have been unable to participate fully in Committee, but I would like to put on record that there is another risk to the taxpayer in the form of retail pensions. In particular, I have concerns about the lack of any underpinning for the Financial Services Compensation Scheme around annuities, which are assumed to be 100% protected. There is a risk to the taxpayer, which I hope the Minister may consider or take back to the department to ensure that some of those issues are addressed through this Bill. Currently the implicit 100% guarantee can be met only by the taxpayer, and offshore operators of bulk annuities pose a serious risk to the retail pension sector.

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[Lord Massey of Hampstead (Con)]

I support this amendment and just raise the point of the First-tier Tribunal. I have experience of dealing with the FOS as a firm. At the moment, if you want to appeal the decision of the FOS, you have to go to judicial review. Therefore, whatever the cost of this First-tier Tribunal, it would be very substantially less than going through a process of judicial review, which firms are reluctant to go through, as noble Lords can imagine, because of its cumbersome nature.

[Baroness Lawlor (Con)]

Can I ask the noble Lord to clarify? Judicial review can determine a matter only if there is a matter of law involved, not a matter of adjudication; is that right?

[Lord Massey of Hampstead (Con)]

That is right.

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[Lord Howard of Rising (Con)]

My Lords, I support Amendment 172E in the name of my noble friend Lady Neville-Rolfe. She expressed her support for it far more ably than I ever could, but I want to say that it would be unrealistic to think that sophisticated financial businesses with complex computer systems and programmes can continue to operate in this country if they cannot protect the secrecy of systems oh whose development they may have spent millions of pounds or dollars.

Whether this is carried out by non-compete clauses, which I imagine will be the easiest way to do it, or some other method, what must be achieved is the ability of financial companies to preserve the security of their systems—that is, if we wish these businesses to remain in this country and not go somewhere else where they will get security for what, as I say, may have cost them many millions to develop. In that context, they just do things that we do not know about. For example, the method of communication in the United States now is to bounce radio waves off the ionosphere. They do not want to come here and show everybody how to do it. So I urge the Minister to pay good attention to what my noble friend has said.

[Baroness Lawlor (Con)]

My Lords, I support my noble friend Lady Neville-Rolfe’s Amendment 172D. The problem of debanking has reached a serious level in the UK, with roughly half a million people reported to be affected last year alone. I welcome and recognise that the Government have moved on this and that the new rules require banks to give 90 days’ notice and provide a clear explanation. I also welcome the fact that there is a right to challenge unresolved disputes via the ombudsman.